Brazil in 2002

Area:

8,514,047 sq km (3,287,292 sq mi)

Population

(2002 est.): 174,619,000

Capital:

Brasília

Head of state and government:

President Fernando Henrique Cardoso

The October 2002 elections for president, the legislature (Federal Senate and Chamber of Deputies), governorships, and state assemblies dominated the year’s events in Brazil. Unable to stand for reelection, Pres. Fernando Henrique Cardoso would in January 2003 oversee the first transition of a democratically elected president to a democratically elected successor in Brazil in more than 40 years.

Entering 2002 the three front-runners for the presidency were “Lula” (Luiz Inácio da Silva; seeBiographies) of the leftist Workers’ Party (PT), Roseana Sarney of the centre-right Liberal Front Party (PFL), and government-backed candidate José Serra of the Brazilian Social Democratic Party (PSDB). The spectre of political violence emerged early on. On January 20 the body of Celso Augusto Daniel, mayor of Santo Andre, was discovered riddled with bullets on a dirt road outside São Paulo. Daniel, who had been kidnapped two days earlier, had been a moderate voice in the PT and was responsible for preparing the government program for Lula. This was the second murder of a PT mayor in São Paulo state in six months, the first having been the September 2001 assassination of Campinas Mayor Antônio da Costa Santos. Responding to the killings, Cardoso stated, “Violence has surpassed all reasonable limits in Brazil....We need a war against organized crime, against banditry in Brazil, and against impunity.” Adding to the terror, on February 2 the headquarters of Unified Labour Central, a PT-influenced labour union, was broken into and robbed. Claiming responsibility for the mayoral murders was an unknown group, the Brazilian Revolutionary Action Front.

On March 1 a federal circuit court judge issued an order for federal police to conduct a search-and-seizure operation in São Luis, Maranhão state, at the offices of the Lunus consultancy, owned by PFL presidential candidate and the governor of Maranhão, Roseana Sarney, and her husband, State Planning Secretary Jorge Murad. Finding about $570,000 in cash at the offices, authorities alleged that Lunus had benefited from a corruption scheme involving the defunct Superintendency for Development of the Amazon. The federal Supreme Court quashed the investigation, however, ruling that only it was imbued with powers to judge governors accused of crimes. Viewing the allegations as a political maneuver by the government to bring down the ascending candidacy of Sarney, the PFL formally broke its seven-year alliance with the PSDB. On March 4 four PFL cabinet ministers resigned their posts. Sarney withdrew her candidacy for president on April 13, though she decided to run for the Senate in Maranhão.

On September 13 Lula addressed the Superior War College and the Air Force Club, which included the leaders of the high command of three branches of the armed forces. In an effort to assuage military fears of his candidacy, Lula gave his views on foreign policy, national defense, and the role of the armed forces, stressing compulsory military service, investments in defense, and a review of Brazil’s participation in the Nuclear Non-proliferation Treaty and agreement with the U.S. concerning use of the Alcântara satellite base.

On October 6 more than 94 million Brazilians went to the polls in first-round elections. With no candidate receiving a majority of the valid votes cast for president, Lula (46.4%) and Serra (23.2%) competed in a second-round runoff election on October 27. During the lead-up to the second round, the third- and fourth-place finishers, Anthony Garotinho of the Brazilian Socialist Party and Ciro Ferreira Gomes of the Popular Socialist Party, threw their support behind Lula. With an overwhelming 62% of the valid votes, Lula was elected president on October 27. On his coattails the PT became the largest party in the 513-seat lower house, increasing its numbers from 58 to 91 seats, followed by the PFL (84), the Brazilian Democratic Movement Party (74), and the PSDB (71). The gubernatorial landscape was markedly different, however, with a number of parties winning states; the PSDB led the way with seven states, the PT claiming only three.

President-elect Lula named the mayor of Ribeirão Prêto, Antônio Palocci, to lead his transition team. To facilitate the transfer of power, Cardoso created a transition team with ministerial status. The PT platform, launched on June 23 and titled “Change Without Rupture,” stressed, among other provisions, an end to hunger, more job creation, economic growth of 5% per annum, and a reduction in the workweek from 44 to 40 hours. The PT also promised to continue to maintain a floating exchange rate with inflation targets and to honour the privatizations concluded and under way.

Beset with political uncertainty, Brazil faced volatile foreign exchange markets in 2002. The Brazilian real lost ground against the U.S. dollar, beginning the year at R$2.30 and topping R$4 in trading on October 10. By mid-November the real had strengthened to R$3.50 to the dollar. To mitigate damage caused by a weak currency, the central bank on October 11 implemented several measures to remove the real from the market, increasing the reserve requirement from 48% to 53% on checking deposits and from 23% to 30% for savings deposits. Banks were limited to using only their own funds on the exchange market, which could not exceed 30% of their net assets, and on October 14 the monetary policy committee raised its benchmark interest rate from 18%—where it had been for most of the year—to 21%.

The official expanded consumer price index (IPCA), which the government used for its inflation targets with the International Monetary Fund, revealed inflation to have been 7.67% in 2001. In the 12 months leading up to October 2002, the IPCA had accumulated inflation of 7.4%. In 2001 the Brazilian Census Bureau reported weak industrial growth of gross domestic product of 1.5%.

On June 30, led by star Ronaldo (seeBiographies) and coach Felipão, Brazil won its fifth World Cup association football (soccer) championship by defeating Germany 2–0. The national team returned to Brasília on July 2 to a record assembly of 400,000 fans in the streets. The victory complemented World Cups from 1958, 1962, 1970, and 1994 and gave Brazil more World Cup titles than any other country.